Debenhams dips as investors turn to company earnings

Shares in London were little changed on Tuesday morning, as a string of companies including Debenhams(DEB.L) revealed the state of their Christmas trading, while investors prepared for the start of the US corporate earnings season.

Despite losses yesterday, the FTSE 100 remains above 6,000 after the strong rally at the start of 2013 after US politicians reached a last-minute fix to avert a fiscal cliff. The benchmark index was this morning trading up marginally at 6070.

Other major European markets were also little moved, ahead of a clutch of important data on the state of the economy. Trade data for Germany published this morning showed a steep fall in exports, adding to evidence that Europe’s largest economy contracted in the final quarter of 2012.

Amid lingering worries that more fiscal challenges remain for US politicians, investors have now turned their attention to the start of corporate earnings reporting season in the US, where markets retreated overnight. The Dow Jones industrial average dropped 51 points, or 0.38%, to 13,384.

Challenging festive high street

In the UK, British retailers provided investors with a glimpse of the state of Christmas trading.

Department store chain Debenhams reported record December sales, up 5% compared with the same period in the previous year. But the retailer cut its full-year forecast for margin growth which, Kate Calvert of Seymour Pierce noted ‘nullifies the better sales performance’. Shares dropped nearly 6% to 110p.

All of that shopping apparently gave Britons an appetite for takeaway pizza, with Domino’s(DOM.L) also reporting a 5% rise in UK sales for the period. Shares in the pizza delivery company fell 1.9% to 517p.

Majestic Wine(MJW.L), meanwhile found Christmas trading ‘challenging’. It reported total sales up 5.1% and LFL sales up 1.1% in the seven weeks to the end of December. Shares rose 0.7% to 453p, while Investec kept the faith, with analyst Bethany Hocking commenting: ‘Majestic remains one of the few organic growth stories in the sector and we remain Buyers’. Nonetheless, she cut her target price to 480p from 485p.

More broadly, the British Retail Consortium meanwhile said that Christmas had ‘fulfilled low expectations’, with UK retail sales rising 0.3% compared with December 2011, ‘not a cause for celebration, but not a disaster either,’ according to Helen Dickinson, director general of the BRC.

More positively for the UK economy, a separate report from the British Chambers of Commerce (BCC) indicated that business sentiment in the UK had risen ‘markedly’ in the last quarter of 2012, while predicting modest economic growth over the next two years.

Investors welcome new Anglo chief

Among other big movers on the FTSE 100 on Tuesday morning, Anglo American(AAL.L) shares rose by 2.2% to 2,045p after the mining company announced that Mark Cutifani would replace Cynthia Carroll as chief executive. Analysts at Nomura said it was a 'solid appointment' that would please investors. 'Importantly, the market will likely be pleased that this one element of uncertainty is past. That said there are many strategic decisions to be made at Anglo American', they said.

Tullow Oil(TLW.L) dipped 1.6% to 1,249p amid a string of analyst downgrades ahead of Friday’s trading update. ‘Clearly the downside from here is that invest9ors continue to mark down the stock’s c.70% premium to core value as Tullow pursues its highly volatile exploration-led strategy,’ noted Societe Generale analysts as they trimmed back their target price for the shares from 1,450p to 1,390p.

African Barrick Gold(ABGL.L) was the biggest loser among mid-cap shares after the miner reported that it was no longer in discussions with China National Gold regarding its 74% stake in ABG. Shares dived by 21% to 350p.

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